Brisbane startup Reputation DAO, which is looking to help decentralised finance (DeFi) platforms address reputation in order to reduce the collateral required for borrowing, has raised a US$4.75 million (A$6.72m) seed round.
The startup was backed by Sydney VC AirTree Ventures, DACM, Koji Capital and Framework Ventures.
Reputation DAO is building the fundamental infrastructure, powered by Chainlink, for a comprehensive credit system to emerge in DeFi – the equivalent of a credit scoring system in traditional finance – to unlock under collateralised lending to a wider set of use cases and take DeFi mainstream.
The funding is to develop the startup’s reputation infrastructure and scoring product. Its analytics can map non-blockchain data such as AML/KYC, traditional credit scores and social media data to enhance the assessment of account-specific risk metrics that are delivered into smart contracts to facilitate hundreds of billions in loans.
Founded by Pat McNab and Ash Morgan in 2019 as part of Mycelium, an Australian-rooted global network building next-generation transaction technology, Reputation DAO will offer a verifiable, decentralised and programmable reputation service for DeFi.
McNab said that a lack of reputation and identity services in DeFi, combined with lending platforms requiring >100% collateralisation, means the potential capital that can flow into DeFi is limited.
“Whilst DeFi is forming an alternate rail for finance to evolve, there’s an abundance of financial data relating to risk, credit and identity that could be leveraged to unlock new applications within DeFi – such as unsecured lending,” he said.
“Interoperability between DeFi and traditional finance is integral to onboard trillions of dollars in capital and billions of users. Reputation DAO provides the conduit for this data to flow into smart contracts, providing greater security, rates and guarantees.”
AirTree Ventures partner John Henderson said DeFi lending markets are “fighting traditional borrowing platforms with one hand tied behind their back” because those loans are over-collateralised.
“Reputation DAO will help remove this barrier, unleashing the power of borrowing and lending via DeFi in the process,” he said.
“Pat, Ash and the Reputation DAO team are building a world-leading set of crypto projects. We are thrilled to back them as they build out this critical piece of financial infrastructure.”
Chainlink co-founder Sergey Nazaroz has signed on as an advisor to the startup and said the lack of a comprehensive credit system for DeFi is one of the missing links hindering its growth.
“By enabling the secure transfer of real-world data to blockchains, Chainlink is helping Reputation DAO unlock the reputation infrastructure necessary to accelerate global DeFi adoption,” he said.